De-industrialisation, financialisation and Australia’s macro-economic trap

The seemingly inexorable decline of manufacturing in Australia is typically explained by firm-level competitiveness, especially labour costs, the challenges posed by a peripheral location, and the (Dutch disease) effects of Australia’s mining boom. We argue that such explanations are insufficient, and look instead to the way that processes of financialisation and the policy settings of other countries combine to inflate the value of the Australian currency and render trade exposed industries uncompetitive. We conclude that Australia is locked into a macroeconomic trap through which the global financial crisis is being exported to peripheral economies.